by From a portfolio management perspective, we have started to raise cash and reduce our equity risk somewhat. Our bond portfolio now has a very short duration, and high cash levels are acting as an early hedge against volatility. We are not getting overly aggressive on hedging risk just yet as the money flow indicators, as shown above, remain supportive. However, that signal is beginning to get more extended, and the market is starting to show early signs of deterioration. As I stated in the open, sometimes we need to act in advance of the correction. Such is particularly the case when there is excess speculation that can lead to very sharp single-day declines that make it extremely difficult to take appropriate actions amid a “panic-driven” sell-off. Conclusion If you missed this week’s
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Lance Roberts considers the following as important: 401-k Plan Manager, Investing, newsletter, Technical analysis
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From a portfolio management perspective, we have started to raise cash and reduce our equity risk somewhat. Our bond portfolio now has a very short duration, and high cash levels are acting as an early hedge against volatility.
We are not getting overly aggressive on hedging risk just yet as the money flow indicators, as shown above, remain supportive. However, that signal is beginning to get more extended, and the market is starting to show early signs of deterioration.
As I stated in the open, sometimes we need to act in advance of the correction. Such is particularly the case when there is excess speculation that can lead to very sharp single-day declines that make it extremely difficult to take appropriate actions amid a “panic-driven” sell-off.
Conclusion
If you missed this week’s post on Howard Marks on “speculative manias,” it is a good analysis of what we are dealing with currently.
Importantly, it is essential to remember that portfolio management is not about ALWAYS being right. It is about consistently getting “on base” that wins the game. There isn’t a strategy, discipline, or style that will work 100% of the time.
“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” – Howard Marks
The biggest driver of long-term investment returns is the minimization of psychological investment mistakes. As an investor, it is merely your job to step away from your “emotions” for a moment. Look objectively at the market around you. Is it currently dominated by “greed” or “fear?” Your long-term returns will depend not only on how you answer that question but how you manage the inherent risk.
Whether it is Paul Tudor Jones or any other great investor throughout history, they all had one core philosophy in common; the management of investing’s inherent risk.
As many of those found out during the Gamestop saga:
“If you run out of chips, you are out of the game.”
The MacroView
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See You Next Week
By Lance Roberts, CIO
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